Recently I have noticed a trend in which US Regulators have been coming down hard on foreign financial institutions (FFI), namely registered entities such as foreign broker dealers. They tell clearing firms and brokers that certain types of businesses and institutions are suddenly deemed as ‘bad’ and insist that they turn away and shut down those businesses. I can only surmise that because the US regulators do not have the jurisdiction to fine, tax and “oversea” the activities directly with these entities is why they are now exerting their powers on the US introducing brokers who have relationship with FFI. Due to these strong-arming tactics, US firms, such as introducing brokers, are losing this outside revenue that were paying American salaries and keeping our economy viable.
I don’t understand the regulators’ logics and objections, actively creating a wall for these firms and thus preventing a more transparent relationship with the US firms and trade activity in the US markets. This does not stop offshore trading or prevent US citizens from opening accounts overseas. Nor does this stops a FFI from opening another account hidden behind a second layer of corporate obfuscation to open an account with the US firms. Who is this really hurting here? It seems counter business, anti-foreign relations and generally bad economics. How is this more transparent to everyone who is trading? This layering creates a muddy sea of hidden entities. Why not allow outside firms and institutions to freely trade in the US stock markets as we already do with our existing foreign policy of free trade agreements with multiple nations? The regulators say they are protecting US investors and the American public by literally anchoring US broker dealers who are subject to their regulations as to who they can and not do business with in the US. And by telling the US broker dealers to reject and close FFI accounts which makes them money is like lining up the US firms like frigate ships and telling them to shoots cannonballs at their clients and any approaching prospect from entering our markets.
I do believe the US regulators should move towards creating a free trade approach instead of putting up revenue inhibiting barriers and discourage economic growth. And I could not agree more with e-How.com when they state “Economies are interconnected through trade accords and a world economy that is becoming less regulated. Governments deregulate the economy through global free trade accords. Free trade not only helps to link economies but helps economies to grow through trade expansion.” The US already benefits from the free trade agreements that govern importing and exporting goods and services. Thus aren’t US regulators in violation of that treaty when they make these special provisions and target FFI as bad accounts?
If the US regulators are so concerned about the oversight of FFI, why not come up with a better course of action than the one they have been using. It is obvious that they expect the US brokers to stand guard to the global community and it is obvious that method is not working or helping anyone. Here are my suggestions:
- Form an International Securities Governing Organization (ISGO) in which all nations who have a securities exchange commission become members of and must follow a standardized rules of operations.
- Rule-making and new provision should be voted on by majority members and it must be in the spirit of “fair play” and beneficial to all members.
I do believe that the exchange commissions from various nations do already collaborate on criminal cases that transcend borders and international waters. Perhaps if this collaboration was more on a permanent basis then the US regulators would not have a view that all FFI should be treated as ETs of the unfriendly kind. We are all members of this global community, we all live on one planet. And we are not living in the dark ages where technology is not at our finger tips to share knowledge and information. Adapting a global free trading model for the US Stock Markets would open the US economy to more growth potential, repatriate foreign sources of revenue and foster globalization. The reality is that the US Stock Markets are slowly weakening and even though the US regulators don’t want to admit it, foreign sources of funds are a big part of the building blocks of our economy. If they continue to chip away at those blocks and destroy them, eventually the entire foundation will crumble.
Source: http://www.ehow.com/about_6748499_global-trade_.html